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Your Boss is Worried About Your Retirement

Scott Holsopple

Your employer may be worried about you.

More specifically, they may be worried about your 401(k) plan participation.

Towers Watson, a consulting company, released a survey earlier this month reporting an uptick in employee participation in defined-contribution retirement plans, like 401(k)s and 403(b)s. In 2010, 50 percent of employers reported high employee participation (80 percent or more). Now, that's risen by 6 percent to 56 percent of employers reporting high participation. These positive numbers probably come from an increase in the number of employers offering automatic enrollment.

Despite strides in the right direction, the same survey showed some very stark numbers related to employee planning and preparedness. Among responding employers:

--Only 21 percent feel employees make educated decisions in dealing with retirement savings;

--A whopping 48 percent expect older employees to delay retirement;

--A mere 26 percent think employees have an accurate picture of how defined-contribution plans fit into their retirement spending;

--Nine percent think employees have set goals for retirement income; and

--Only 15 percent think employees utilize, to any real effect, the planning resources that employers are providing, even as 65 percent of employers believe they provide adequate resources for employee retirement planning.

The gist of the results is this: increased efforts, by employers, to compel employees to participate in retirement plans have had some effect--but bosses are still worried.

You may wonder why your employer cares. There are several reasons. All plan sponsors have a fiduciary responsibility to provide a quality plan with good service. Employers also receive a tax deduction for the contributions they make to your account, which is more valuable to larger companies. Small- and mid-sized firms benefit from greater plan participation because increasing plan size means deeper fee discounts and better fund selection. Of course, all companies want to promote job satisfaction, which is tied to compensation and benefits, in order to maintain good job performance and retain high-caliber employees.

So we know your employer could be worried, and we know why. Let's look at their anxiety and note that all of the employers' concerns can be addressed by creating a retirement strategy.

Planning resources: As you're creating your retirement strategy, use all the educational and planning resources available through your plan. You may have access to educational materials, calculators, tools, retirement advice and more. Ask your human resources department or contact your plan administrator to outline these options for you.

Setting goals: Without goals, you won't know where you're going. As part of your retirement strategy, plan your retirement lifestyle, and then establish savings and investing goals based on the amount of money you'll require during retirement. Refer to your planning resources to help work through your goals.

Hit-or-miss decision-making: Many people haphazardly choose contribution levels and investments. Others take investing advice from loved ones or acquaintances. A retirement strategy will spell out your current and future contribution levels. And it will include an investing allocation based on your individual situation. It will establish where you are, where you want to be and what you need to do to get there.

Where your 401(k) fits: Your 401(k) account may be your only retirement saving vehicle, or it may be one of several. Either way, if you know your goals, you can estimate how much you'll need to contribute to reach them. And you'll understand how much of your retirement your 401(k) account will cover. Understanding this will help you avoid running out of money.

When employees approach retirement age and realize they won't have enough money to retire as planned, they keep working. Regardless of your age and retirement timeline, establishing a retirement strategy will help you understand where you are now and how far you can go. Even if you find you'll need to delay retirement, a good strategy can help you minimize additional years of work.

Scott Holsopple is the president and CEO of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.

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